Belt and Road

Key Information

Capital

Warsaw

Population

38.4 million

Area

312,685 sq km

Currency

Polish Zloty (1 PLN = 0.2756 USD or 0.2334 EUR as of 24 August 2017)

Official language

Polish

Form of government

Parliamentary republic

Ease of doing business by World Bank

# 24 out of 189 in 2017 (↑1)

The Global Competitiveness Index by the World Economic Forum

# 36 out of 138 in 2016/17 (↑5)

Logistics Performance Index by World Bank

# 33 out of 160 in 2016

Major merchandise exports (% of total, 2015)

Major merchandise imports (% of total, 2015)

Manufactured goods (78.7%)

Manufactured goods (78.0%)

Agricultural products (14.2%)

Fuels and mining products (10.9%)

Fuels and mining products (6.9%)

Agricultural products (10.3%)

Top three export markets (% of total, 2016)

Top three import markets (% of total, 2016)

European Union (78.9%)

European Union (59.6%)

Russia (2.9%)

China (12.4%)

USA (2.4%)

Russia (6.1%)

Source: Economist Intelligence Unit, the World Trade Organization

Political Highlights

Poland is a parliamentary republic. Parliamentary elections are held at least once every four years. Beata Szydlo of the right-wing Eurosceptic Law and Justice party (PiS) became prime minister in 2015, following the party's general election victory. With a majority in the lower house, PiS was the first party to govern Poland alone in the country’s post-communist era, as the party successfully tapped into nationalist sentiment tied to fears over migration, particularly among young voters.

The government has made a series of changes to the country’s institutions and increased its control over the media, judicial system and constitutional court. The controversial moves have made domestic politics more polarized and have drawn concerns from the EU that they would undermine the country’s rule of law and media freedom. Poland also refused to abide by EU mandatory refugee resettlement quotas. In June 2017, the EU launched infringement proceedings against Poland for failing to take part in the scheme.

While relations with the EU have soured, the Polish government shares similar stances with the US President Donald Trump, on issues such as climate change and immigration. Poland, along with other Nato members, is particularly relieved after Trump endorsed Article 5, which ensures that Nato allies will come to each other's defense in the event of an attack. About 900 US troops are currently in Poland under a Nato operation to reassure the alliance’s Eastern European allies amid concerns over potential Russian aggression. Meanwhile, Poland, who currently gets about two-thirds of its gas from Russia, has been striving to find alternative sources for national security reasons.

Economic Trend

* Estimates

Source: the International Monetary Fund

Poland has the largest economy in Central Europe. It is the main beneficiary of EU Structural Funds and will receive over EUR 80 billion during 2014-2020. Thanks to accommodative monetary and fiscal policies, and substantial EU funding, Poland’s near-term growth outlook is positive. Real GDP growth is expected to accelerate in 2017 and remain strong in 2018, with domestic demand remaining the key driver of the economy. In particular, private consumption is forecast to grow strongly by around 4% in 2017, driven by solid wage growth and higher social spending on welfare benefits.

Although Poland joined the EU in 2004, it is not yet a member of the eurozone. The zloty is not yet within the Exchange Rate Mechanism, which is one of the convergence criteria for entry into the single currency bloc. Poland does not have a target date to adopt the euro. Some politicians objected to the accession as the zloty's sharp fall during the global financial crisis had boosted export competitiveness and played a key role in helping Poland avoid recession. Moreover, the Polish public is hesitant about changing to the euro due to sovereign debt problems of some eurozone members.

With GDP per capita at 69% of the EU average in 2016, there is plenty of room to catch up with the core of the EU in terms of economic development and living standards. As such, structural reforms to boost productivity are needed, especially when competitive advantage based on low manufacturing and labor costs is being eroded by rising prosperity. So far, Poland’s investment in research and development (R&D) has been relatively insufficient. In 2015, expenditure on R&D as a percentage of GDP was 1% compared to the EU average of 2.03%. This shortfall could further threaten Poland’s ability to catch up.

Hong Kong – Poland Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Poland increased by 10.4% from HK$9,139 million in 2015 to HK$10,085 million in 2016. The top three export categories to Poland were: (1) telecommunications, audio & video equipment (+56.4%), (2) electrical machinery, apparatus & appliances, & parts (-7.4%), and (3) office machines & computers (+3.8%), which represented 79.3% of total exports to Poland.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering Polish buyers. Currently, the insured buyers in Poland range from small and medium sized companies to listed companies. For 2016, the number of credit limit applications on Poland decreased by 12.4% while the amount of credit limit applications increased by 32.6%. The insured business decreased by 28.5%. Major insured products were electrical appliances (-0.9%), chemical products (-43.5%) and electronics (-49.0%), which represented 59.9% of ECIC’s insured business on Poland. The Corporation’s underwriting experience on Poland has been acceptable, with three payment difficulty cases reported in the past 12 months (August 2016 to July 2017), involving jewellery and electrical appliances.

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Last update: 28 August 2017

Key Information

Capital

Belgrade

Population

7.1 million

Area

77,474 sq km

Currency

Serbian Dinar (1 RSD = 0.0099 USD as of 21 August 2017)

Official language(s)

Serbian

Form of government

Republic

Ease of doing business by World Bank

# 47 out of 190 in 2017 (↑7)

The Global Competitiveness Index by the World Economic Forum

# 90 out of 138 in 2016/17 (↑4)

Logistics Performance Index by World Bank

# 76 out of 160 in 2016

Major merchandise exports (% of total, 2015)

Major merchandise imports (% of total, 2015)

Manufactured goods (67.6%)

Manufactured goods (62.9%)

Agricultural products (22.4%)

Fuels and mining products (16.2%)

Fuels and mining products (8.1%)

Agricultural products (9.5%)

Top three export markets (% of total, 2016)

Top three import markets (% of total, 2016)

European Union (66.2%)

European Union (63.1%)

Bosnia and Herzegovina (8.3%)

China (8.3%)

Russia (5.3%)

Russia (7.9%)

Sources: Economist Intelligence Unit, the World Trade Organization

Political Highlights

Serbia became a stand-alone sovereign country in 2006 following Montenegro’s request for independence from the Union of Serbia and Montenegro. It is a parliamentary democracy with a multi-party system. Under the constitution, the post of president is largely ceremonial and the prime minister holds executive power. In the parliamentary election in 2016, the center-right pro-EU Serbian Progressive Party (SNS), which has been in power since 2012, retained the majority in parliament by winning 131 of the 250 seats. Its leader, Aleksandar Vucic, won the 2017 presidential election and Ana Brnabic was appointed prime minister.

The government’s main tasks are to continue economic reform and its drive towards EU membership. The reforms include squeezing the public sector, privatising state-owned companies and expanding the private sector. In terms of accession to the EU, Serbia was formally invited to begin European Union (EU) membership negotiations in 2014. It aims to finish negotiations with the EU by 2019 and become an EU member as soon as possible thereafter. However, Serbia’s strained relation with Kosovo, which unilaterally declared independence from Serbia in 2008, has been one of the biggest hurdles to concluding the accession talks.

While Serbia is pursuing EU membership, it hopes to maintain good relations with its traditional ally, Russia, with which it shares Slav and Orthodox Christian history. However, Russia opposes the integration of Balkan countries (including Serbia) into the EU, and is trying to extend its influence. Meanwhile, Serbia has strengthened ties with China and they have agreed to cooperate on several big projects, including the construction of railways and roads in Serbia. Serbia’s strategic location in Eastern Europe has made it a vital point in China’s attempts to link its Belt and Road Initiative to Central Europe.

Economic Trend

*Estimates

Source: the International Monetary Fund (IMF)

Serbia is an investment destination for manufacturing and processing industries. This is supported by its strategic location, relatively cheap and skilled labor force, and the economic reforms it is undergoing as part of the IMF agreement and the EU accession process. It also benefits from free trade agreements with the EU, Russia, Turkey, and countries that are members of the Central European Free Trade Agreement.

In 2016, real GDP grew by 2.8% year-on-year, the fastest pace since 2008. It was driven mainly by a continuously strong expansion of exports and a modest increase in domestic demand. On the supply side, economic growth was broad-based as almost all sectors expanded. In the short term, economic growth is forecast to accelerate and be increasingly driven by private consumption.

Over the past few years, Serbia has undertaken significant economic reforms and fiscal consolidation, in order to correct its macroeconomic imbalances. Last year, fiscal deficit was narrowed sharply to 1.3% of GDP, the lowest level in nearly a decade, while public debt started to decline.

Despite economic development, Serbia’s GDP per capita was only 36% of the European Union average in 2016 according to Eurostat, the statistical office of the European Union. Serbia’s main challenges are to improve living standards in the country and transform the economic recovery into more jobs in the private sector.

Hong Kong – Serbia Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Serbia increased by 29.9% from HK$463 million in 2015 to HK$601 million in 2016. The top three export categories to Serbia were: (1) telecommunications, audio & video equipment (+49.0%), (2) office machines & computers (+46.8%), and (3) power generating machinery and equipment (+12.0%), which represented 81.2% of total exports to Serbia.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering Serbian buyers.  The Corporation’s underwriting experience on Serbia has been satisfactory, with no claim payment or payment difficulty case reported during the past 12 months (from August 2016 to July 2017).

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Last update: 21 August 2017

Key Information

Capital

Bishkek

Population

5.9 million

Area

199,951 sq km

Currency

Kyrgystani Som (1 KGS = 0.0145 USD as of 17 August 2017)

Official language

Kyrgyz

Form of government

Republic

Ease of doing business by World Bank

# 75 out of 190 in 2017 (↓2)

The Global Competitiveness Index by the World Economic Forum

# 111 out of 138 in 2016/17 (↓9)

Logistics Performance Index by World Bank

# 146 out of 160 in 2016

Major merchandise exports (% of total, 2015)

Major merchandise imports (% of total, 2015)

Precious metals & stones (45.5%)

Mineral products (20.0%)

Mineral products (7.2%)

Machinery & equipment (13.1%)

Textiles (4.7%)

Chemicals (9.1%)

Top three export markets (% of total, 2016)

Top three import markets (% of total, 2016)

Russia (21.7%)

China (32.8%)

Kazakhstan (18.2%)

Russia (26.5%)

Turkey (8.1%)

Kazakhstan (17.4%)

Sources: Economist Intelligence Unit

Political Highlights

Kyrgyzstan is a landlocked, mountainous country located in Central Asia. Most of its nearly six million people are Turkic-speaking Muslims. Kyrgyz is the major ethnic group (71% of population), followed by Uzbek (14%) and Russian (8%). As a former Soviet republic, Kyrgyzstan has faced obstacles in reforming its political structure. It adopted a parliamentary system in 2011 but political environment remained volatile. In 2016, Sooronbay Jeenbekov was elected by the parliament as prime minister. He is the 18^th man to serve as prime minister of Kyrgyzstan within 25 years since the country’s independence. The next parliamentary election is scheduled for 2020.

The government’s main policy challenges include reducing the poverty rate (2015: 32% of population), reviving the economy in the aftermath of regional economic downturn, and harnessing the country’s natural resources. It also needs to resolve a long-standing dispute over ownership structure with a Canadian firm, which operates the country’s biggest gold mine. Meanwhile, tensions between Kyrgyz and Uzbek also represent a risk to social stability.

Kyrgyzstan joined the Russian-led Eurasian Economic Union (EEU) in 2015, which allows for the free movement of labour, goods, services and capital within the bloc. The bloc members also include Armenia, Belarus and Kazakhstan. Meanwhile, ties with China have been strengthening through multilateral arrangements including the Shanghai Cooperation Organization (SCO) and the Program of Cooperation between Kyrgyzstan and China 2015-2025.

Economic Trend

* Estimates

Source: the International Monetary Fund (IMF)

Kyrgyzstan is rich in mineral resources. Kumtor, its major gold mine, accounts for about 10% of GDP. The country also relies heavily on worker remittances from workers abroad (primarily in Russia), equivalent to about 30% of GDP in 2011-2015. The decline in commodity prices since mid-2014 and the subsequent regional economic slowdown have weighed on the economy. While pressures on the economy are moderating thanks to a stabilizing regional context, subdued consumption and low investment are expected to continue to constrain growth prospects.

Weaker economic growth in recent years has put pressures on Kyrgyzstan’s macroeconomic stability. In 2015, the International Monetary Fund approved a three-year US$ 92.4 million Extended Credit Facility arrangement for Kyrgyzstan, in order to support the country’s fiscal sustainability, and to reduce vulnerabilities stemming from weak regional environment and dependency on gold and remittances. In exchange for the assistance, the government is required to implement prudent economic policies and structural reforms such as boosting tax revenues and reducing the wage bill.

Currently, mining constitutes the bulk of Kyrgyzstan’s export earnings, leaving the economy vulnerable to external shocks. The country has sought to attract foreign investment to expand its export base, including the construction of hydroelectric dams. But a significant improvement in the business environment would be essential to achieve this, as the protracted disagreements between the government and the country’s largest foreign investor, as well as frequent personnel changes in key government positions, have made the environment more uncertain. Meanwhile, Kyrgyzstan has a relatively high degree of dollarization. The IMF estimated that deposit dollarization ratio was 55% and loan dollarization ratio was 43% at the end of 2016. The dollarization increases the country’s exchange rate exposure, as the exchange rate movements could strongly affect the demand for credit and choice of currency.

Hong Kong – Kyrgyzstan Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Kyrgyzstan increased by 40.5% from HK$42 million in 2015 to HK$59 million in 2016. The top three export categories to Kyrgyzstan were: (1) telecommunications, audio & video equipment (+49.0%), (2) photographic apparatus, equipment and supplies and optical goods, nes; watches and clocks (+6.3%), and (3) office machines & computers (+37.9%), which represented 82.0% of total exports to Kyrgyzstan.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) offers coverage on Kyrgyzstani buyers with payment terms in Irrevocable Letter of Credit (ILC). In the past 12 months (from August 2016 to July 2017), there was no insured business on Kyrgyzstan.

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Last update: 15 August 2017

Key Information

Capital

Muscat

Population

4.4 million

Area

309,500 sq km

Currency

Omani Rial (pegged to the US dollar at 1 USD = 0.3845 OMR)

Official language(s)

Arabic

Form of government

Monarchy

Ease of doing business by World Bank

# 66 out of 190 in 2017 (↑3)

The Global Competitiveness Index by the World Economic Forum

# 66 out of 138 in 2016/17 (↓4)

Logistics Performance Index by World Bank

# 48 out of 160 in 2016

Major merchandise exports (% of total, 2015*)

Major merchandise imports (% of total, 2014*)

Fuels and mining products (54.1%)

Manufactured goods (73.0%)

Manufactured goods (12.6%)

Agricultural products (13.4%)

Agricultural products (3.9%)

Fuels and mining products (12.9%)

Top three export countries (% of total, 2016)

Top three import countries (% of total, 2016)

China (43.6%)

United Arab Emirates (45.1%)

United Arab Emirates (7.5%)

European Union (7.8%)

India (3.8%)

China (4.8%)

* Most recent year for which data are available

Sources: Economist Intelligence Unit, the World Trade Organization

Political Highlights

Oman is a relatively small oil-producing kingdom and has been ruled by Sultan Qaboos bin Said Al-Said since 1970. Following a wave of pro-democracy protests across the Arab world in 2011, Oman has been pushing cautious reforms, including broadening the powers of the legislative body, and the country remains relatively stable. However, the Sultan is now at age 76 and there is uncertainty over the future transfer of power, as he is childless with no obvious heir.

The country has so far been spared the militant Islamist violence that has plagued some of its neighbours. It has managed to stay out of disputes and largely fend off threats from extremist groups. It maintains good relationships with Western allies and other Middle Eastern countries, and acts as a mediator between opposing sides. Meanwhile, Oman also maintains strong economic ties with China, an important trading partner and a major source of foreign direct investment.

Economic Trend

^#Actual * Estimates
Source: International Monetary Fund

Oman’s economy is based primarily on the hydrocarbon sector, which accounts for nearly 70% of government revenue. Like the other Gulf countries, Oman’s finances have been hit hard by the plunge of oil prices since 2014. As Oman lacks ample oil and fiscal reserves that its wealthy neighbours possess, it has less room to cope with large budget deficits, and resorts to borrowing from both domestic and external sources. The government’s 2017 budget plan includes fresh austerity measures, but additional fiscal adjustments will be needed to restore sustainability.

Economic growth for 2017 will continue to be constrained by a number of factors. Government spending cuts will weigh on economic activity, including private consumption, which will suffer from subsidy cuts and slower public-sector wage growth. In the meantime, cuts in oil production agreed with OPEC will also retard growth.

Moving forward, Oman hopes to diversify its economy away from the hydrocarbon sector. The ninth five year plan, covering 2016 to 2020, focuses on the development of non-oil sectors such as manufacturing, transportation and logistics, tourism, fisheries and mining. It also encourages a bigger role of the private sector in the economy through privatization programs, developing small and medium enterprises, and improving the investment climate. Given the dominance of the oil sector in the economy, these reforms are expected to take time.  

Hong Kong – Oman Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Oman increased by 26.2% from HK$787 million in 2015 to HK$993 million in 2016. The top three export categories to Oman were: (1) telecommunications, audio & video equipment (+18.6%), (2) power generating machinery and equipment (+100.3%), and (3) office machines & computers (-18.3%), which represented 82.1% of total exports to Oman.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering Omani buyers. For 2016, the number and the amount of credit limit applications on Oman increased by 14.3% and 111.8% respectively, while insured business decreased by 11.0%. Major insured products were clothing (-18.6%), electrical appliances (-40.7%) and chemical products (+94.4%), which represented 42.6% of ECIC’s insured business on Oman. The Corporation’s underwriting experience on Oman has been satisfactory, with no payment difficulty or claim payment case reported during the past 12 months (August 2016 to July 2017).

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Last update: 9 August 2017

Key Information

Capital

Seoul

Population

50.8 million

Area

99,720 sq km

Currency

South Korean Won

(1 KRW = 0.0009 USD as of 3 August 2017)

Official language

Korean

Form of government

Presidential republic

Ease of doing business by World Bank

# 5 out of 190 in 2017 (↓1)

The Global Competitiveness Index by the World Economic Forum

# 26 out of 138 in 2016/17 (No change)

Logistics Performance Index by World Bank

# 24 out of 160 in 2016

Major merchandise exports (% of total, 2016)

Major merchandise imports (% of total, 2016)

Machinery & transport equipment (58.8%)

Machinery & transport equipment (35.1%)

Manufactured goods (13.1%)

Mineral fuels, lubricants & related materials (20.2%)

Chemicals & related products (12.0%)

Manufactured goods (11.7%)

Top three export markets (% of total, 2016)

Top three import markets (% of total, 2016)

China (25.1%)

China (21.4%)

USA (13.5%)

Japan (11.7%)

Hong Kong (6.6%)

USA (10.7%)

Source: Economist Intelligence Unit

Political Highlights

Following the impeachment of President Park Geun-hye, Moon Jae-in from the liberal Democratic Party was elected president in May 2017, becoming the first liberal president after nine years of conservative rule in the Republic of Korea (often referred to as South Korea). He pledged to reform South Korea’s powerful family-run conglomerates, known as chaebols, which make up the bulk of GDP and are influential over domestic politics. He also pledged to set up a body to investigate corruption by high-ranking public officials, and raise minimum wage and create more public sector jobs.

However, sweeping policy changes are not easy in a divided National Assembly, where Moon's Democratic Party holds only 120 of the 300 seats and the conservative Liberty Korea Party, the second-largest party, holds 107 seats. The lack of a parliamentary majority may impede policy implementation. Therefore, cooperation with the opposition on divisive issues is essential, and Moon may need to first tackle issues with some common ground among political parties and the public.

On the international front, South Korea is facing a dilemma amid escalating threats from North Korea and the strained relations with China. On the one hand, South Korea is on the front line of any North Korean attack and eager to maintain security ties with the U.S., but on the other hand, its attempt to deploy a US missile defense system (THAAD) has strained relations with China, its major trading partner. Moon has so far taken a softer stance toward North Korea than his predecessor. But given that Pyongyang has conducted a series of missile launches since the start of last year, finding a way to ease North Korea’s nuclear threats would be complicated.

Economic Trend

^ Forecasts
Source: Economist Intelligence Unit

South Korea is an export-oriented economy. Its trade data are viewed as a proxy for the global trade picture because of the country’s heavy dependence on imports of raw materials and exports of goods such as cars and phones. Following decades of impressive economic progress, growth has been relatively sluggish since 2012 due to subdued global trade, and the authorities have responded with fiscal and monetary support. The new government has recently announced a US$ 9.6 billion stimulus package mainly for creating public sector jobs, while the Bank of Korea has maintained its benchmark interest rate at a record low of 1.25%. For 2017, economic growth is forecast to accelerate slightly to 2.9% thanks to a recovery in global trade and an improvement in domestic consumption.

While loose monetary policy has supported economic growth in recent years, mounting household debt has become a side-effect. At the end of last year, household debt rose to a record of 1,344.3 trillion won (US$1.19 trillion), equivalent to over 90% of GDP, and is seen as a major risk to the country’s financial system. High levels of household indebtedness have exerted a drag on private consumption as incomes are diverted to debt servicing. It could also act as a major impediment to economic growth when the central bank tightens monetary policy in the future. In order to contain such risk, the authorities announced more stringent bank screening of loan applications.

South Korea is a strong proponent of free trade. It attempts to bolster its trading position by signing free-trade agreements (FTAs) with important trading partners. Not only has it completed such deals with the European Union (2011) and the US (2012), but in 2015 it finally inked a deal with China as well. There is no doubt that South Korea’s economic success has been achieved on the back of exports, but heavy reliance on exports has recently sparked concerns. On one hand, China’s slowing growth and moving up the value chain might negatively affect South Korea’s exports. On the other hand, protectionist sentiment that is rising around the world and a possible revision of the South Korea-US free trade agreement would also bring uncertainties to the economy. In the longer term, a rebalancing to make the economy less dependent on volatile external demand would increase South Korea’s resilience.

Hong Kong – Republic of Korea Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to the Republic of Korea decreased by 0.6% from HK$54,380 million in 2015 to HK$54,040 million in 2016. The top three export categories to the Republic of Korea were: (1) electrical machinery, apparatus & appliances, & parts (-2.3%), (2) telecommunications, audio & video equipment (+2.2%), and (3) office machines & computes (+12.7%), which represented 67.8% of total exports to the Republic of Korea.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering buyers in the Republic of Korea. Currently, the insured buyers in the Republic of Korea range from small and medium sized companies to listed companies. For 2016, the number and the amount of credit limit applications on the Republic of Korea decreased by 21.6% and 58.1% respectively. Insured business decreased by 46.4%. Major insured products were clothing (+126.0%), electrical appliances (-35.7%) and cameras & optical goods (-91.0%), which represented 62.3% of ECIC’s insured business on the Republic of Korea. The Corporation’s underwriting experience on the Republic of Korea has been satisfactory, with three payment difficulty cases and two claim cases in the past 12 months (from August 2016 to Jul 2017), involving jewellery, clothing, mineral products, and camera & optical goods.

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Last update: 7 August 2017

Key Information

Capital

Wellington

Population

4.7 million

Area

268,838 sq km

Currency

New Zealand Dollar (1 NZD = 0.7492 USD as of 31 July 2017)

Official language

English

Form of government

Parliamentary monarchy

Ease of doing business by World Bank

# 1 out of 190 in 2017 (No change)

The Global Competitiveness Index by the World Economic Forum

# 13 out of 138 in 2016/17 (↑3)

Logistics Performance Index by World Bank

# 37 out of 160 in 2016

Major merchandise exports (% of total, 2016)

Major merchandise imports (% of total, 2016)

Dairy products (23.1%)

Machinery & electrical equipment (21.5%)

Meat products (12.2%)

Transport equipment (18.4%)

Forestry products (8.5%)

Mineral fuels (8.5%)

Top three export markets (% of total, 2016)

Top three import markets (% of total, 2016)

China (19.3%)

China (20.0%)

Australia (17.0%)

Australia (12.6%)

USA (10.9%)

USA (11.4%)

Sources: Economist Intelligence Unit

Political Highlights

New Zealand is a parliamentary democracy and one of the Asia–Pacific region’s most prosperous countries. It enjoys a stable political environment and ranks highly internationally for its governmental transparency and low levels of corruption. Elections are held every three years and the next general election will be held in September 2017. It will determine whether the centre-right National Party, in power since 2008, will secure a fourth term in office. This has become less certain since December 2016, when former Prime Minister John Key unexpectedly resigned and his deputy, Bill English, was elected to replace him.

If the National Party wins the 2017 election, English is expected to continue to pursue a centre-right agenda, focused on fiscal consolidation, cutting red tape, pursuing FTAs and reducing long-term welfare dependency. Meanwhile, the government will need to address the housing affordability, which has become a major election issue. House prices have increased rapidly in recent years, particularly in Auckland, the most populous city. This has fuelled concerns over financial stability, housing affordability and inequality.

New Zealand’s closest international ally is Australia, and their relationship is formally underpinned by the Closer Economic Relations Trade Agreement signed in 1983. Meanwhile, New Zealand plays an active role in Pacific affairs. It has constitutional ties with the Pacific territories of Niue, the Cook Islands and Tokelau.

Economic Trend

* Estimates
Source: The International Monetary Fund (IMF)

In 2016, New Zealand registered solid economic growth on the back of strong construction activity, an accommodative monetary policy, and high net migration. However, growth rates have slowed in recent quarters. In the first quarter of 2017, the economy expanded by 2.5% yr/yr, down from 2.7% in the previous quarter, tempered by weaker construction activity. It is expected that the central bank will keep its main policy rate on hold at its record-low of 1.75% this year in order to support economic growth.

Strong house price growth has softened slightly following tighter loan-to-value restrictions and higher mortgage interest rates late last year, and is expected to ease further as new supply comes into the market. Despite some cooling in the housing market, household debt remains a risk to financial stability. The gross debt-to-income ratio across all households stands now at around 168% according to the International Monetary Fund, placing New Zealand above most other OECD countries.

New Zealand is a strong proponent of trade liberalisation and has numerous free trade agreements, largely with its Asia-Pacific neighbours. These include FTAs with Australia, China, Hong Kong, ASEAN, Malaysia, Singapore, South Korea and Thailand. New Zealand was the first Western country to sign a free trade agreement with China and the first to join the China-initiated Asian Infrastructure Investment Bank. Now, China is New Zealand’s major trading partner, with two-way trade valued at over NZ$22 billion (US$16 billion) in 2016.

Hong Kong – New Zealand Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to New Zealand decreased by 7.8% from HK$4,571 million in 2015 to HK$4,216 million in 2016. The top three export categories to New Zealand were: (1) telecommunications, audio & video equipment (+6.9%), (2) office machines & computers (-8.3%), and (3) clothing & clothing accessories (-25.7%), which represented 61.5% of total exports to New Zealand.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering buyers in New Zealand. Currently, the insured buyers in New Zealand are mainly small and medium sized companies. For 2016, the number of credit limit applications on New Zealand decreased by 23.0% while the amount increased by 1.3%. Insured business de ew Zealand decreased by 23.0% while the amount of credit limit applications increased by 1.3%creased by 7.6%. Major insured products were clothing (+44.3%), printed matters (+36.9%) and plastic articles (+43.4%), which represented 56.6% of ECIC’s insured business on New Zealandd plastic articles (. The Corporation’s underwriting experience on New Zealand has been acceptable, with five payment difficulty cases and one claim case in the past 12 months (from August 2016 to Jul 2017), involving clothing and office & stationery supplies.

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Last update: 2 August 2017

Key Information

Capital

Naypyidaw

Population

54.4 million

Area

676,578 sq km

Currency

Myanmar Kyat (1 MMK = 0.0007 USD as of1 August 2017)

Official language

Burmese

Form of government

Parliamentary republic

Ease of doing business by World Bank

# 170 out of 190 in 2017 (↑1)

Logistics Performance Index by World Bank

# 113 out of 160 in 2016

Major merchandise exports (% of total, 2014*)

Major merchandise imports (% of total, 2015*)

Fuels and mining products (43.8%)

Manufactured goods (75.1%)

Manufactured goods (29.5%)

Fuels and mining products (12.3%)

Agricultural products (26.5%)

Agricultural products (4.9%)

Top three export countries (% of total, 2016)

Top three import countries (% of total, 2016)

China (40.8%)

China (34.4%)

Thailand (19.2%)

Singapore (14.5%)

India (8.9%)

Thailand (12.7%)

* Most recent year for which data are available

Sources: Economist Intelligence Unit, the World Trade Organization

Political Highlights

Following decades of military rule and isolation, Myanmar is transitioning into a more open country. The National League for Democracy (NLD) led by Aung San Suu Kyi, the figurehead of the country’s pro-democracy movement, came into power in 2016, marking a milestone in the country's path to democracy. While Aung San Suu Kyi remains constitutionally barred from the presidency, she acts as a de facto leader by taking on a newly created role of state counselor as well as some key government positions. Htin Kyaw, her confidant, was elected president by the parliament.

Despite significant reforms, the military remains politically powerful, and the current constitution will continue to entrench the primacy of the military. As a quarter of seats in both parliamentary chambers are reserved for the military, the military has the power to veto any changes to the constitution, as that would require more than 75% of parliamentary votes. Also, the military is guaranteed control over the key ministries of border affairs, defense and home affairs.

Apart from the political issues stemming from the liberalization process, the government faces other major challenges. Inside the country, ethnic and religious tensions, some of which are spilling into violence between the Buddhist majority and Muslim minority, pose a threat to political stability. Externally, relations with the West could be strained due to the government’s treatment of the minority. The government also needs to handle relations with China, an important trading partner and source of foreign direct investment.

Economic Trend

* Estimates

Source: the International Monetary Fund (IMF)

Fiscal years begins 1 April of year shown

Since 2011, when a military-backed civilian government was formed, Myanmar has begun an economic overhaul aimed at attracting foreign investment and reintegrating into the global economy. Economic reforms include establishing a managed float of the Kyat, granting the Central Bank operational independence, liberalizing the telecommunications sector, and grating licenses to foreign banks. These reforms and the subsequent easing or lifting of Western sanctions have paid off, with the economy growing strongly in recent years.

With continued structural reforms and the strengthening of foreign direct investment in a number of industries, such as telecommunications, oil and gas, and manufacturing (primarily garments), the growth prospect of the Myanmar economy remains favorable. Thanks to its membership in the ASEAN and its strategic location between China and India, Myanmar will benefit from an expected relocation of manufacturing plants around the region in search of lower labor cost. In April 2017, Myanmar began implementing a new investment law designed to promote foreign investment and open more economic sectors to private investment.

Despite strong economic growth, Myanmar’s GDP per capita was still low at around US$ 1,300 in 2016. Decades of isolationist policies and economic mismanagement have left the country with macroeconomic imbalances and deficient infrastructure. To achieve sustainable growth and improve living standards for the majority of the population, the government needs to deepen structural reforms. From a strategic development point of view, improvements in agricultural productivity is particularly important, as the sector represents the core means of livelihood for half of the population. Given the NLD’s lack of administrative experience, the government will face tests in its abilities in policy formulation and implementation. 

Hong Kong – Myanmar Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Myanmar decreased by 24.2% from HK$2,021 million in 2015 to HK$1,532 million in 2016. The top three export categories to Myanmar were: (1) telecommunications, audio & video equipment (-55.9%), (2) textiles (+24.1%), and (3) photographic apparatus, equipment and supplies and optical goods, nes; watches and clocks (+10.2%), which represented 60.2% of total exports to Myanmar.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering buyers in Myanmar with the exception of those under US and EU sanctions¹. Major insured products were textiles. The Corporation’s underwriting experience on Myanmar has been satisfactory, with no claim payment or payment difficulty case reported in the past 12 months (from August 2016 to July 2017).

Please click here to download the charts (PDF format)

Last update: 1 August 2017

¹ EU sanctions: http://eeas.europa.eu/cfsp/sanctions/index_en.htm;
US sanctions: http://www.treasury.gov/resource-center/sanctions/Programs/pages/burma.aspx

Key Information

Population

4.7 million

Area

West Bank: about 5,800 sq km; Gaza Strip: 365 sq km

Currency

Israeli New Shekel (ILS), Jordanian Dinar (JOD)

(As of 29 July 2017, 1 ILS = 0.2809 USD, 1 JOD = 1.4089 USD)

Official language

Arabic

Sources: Economist Intelligence Unit

Political Highlights

Palestine is an Arab state consisting of two distinct areas: the West Bank and the Gaza Strip. In the West Bank, Fatah, a secular political party formerly known as the Palestinian National Liberation Movement, is in power. In the Gaza Strip, the government is led by the Islamist group Hamas.

Palestine has had a long-standing conflict with Israel, which refuses to consider Hamas a legitimate government, and only considers the leadership of the West Bank to be its legitimate negotiating partner. Since the group controlled the Gaza Strip in 2007, Hamas has fought three wars with Israel. Despite international efforts to broker a peace deal in the past two decades, Israeli-Palestinian talks have remained stalled.

The rivalries between Fatah and Hamas will remain a feature of political environment in Palestine. Although reconciliation efforts will continue, differences in ideology and attitude to Israel, as well as internal struggles within Fatah, will pose obstacles for long-term planning and policymaking in Palestine.

Economic Trend

The lack of peace has created a challenging economic situation in Palestine. Donor support has significantly declined in recent years and investor confidence remains weak because of the lack of political progress and ongoing restrictions put in place by Israel. In 2016, the unemployment rate was high at 27%: 42 % in Gaza and 18% in the West Bank.

All trade is conducted via Israel or through Israeli-monitored land crossings through Jordan. Palestine is heavily dependent on imported goods, and export earnings are vulnerable to sudden impositions of movement and border restrictions by Israel if the security situation deteriorates.

Palestine does not have its own currency. In the West Bank, the Israeli new shekel and Jordanian dinar are widely accepted. In recent years, attempts have been made to reduce reliance on the shekel, but there is unlikely to be significant progress.
 

Hong Kong – Palestine Trade

Data is not available from the Census and Statistics Department of Hong Kong.

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) offers coverage on buyers in Palestine with payment terms in Irrevocable Letter of Credit (ILC). In the past 12 months (from July 2016 to June 2017), there was no insured business on Palestine.

Last update: 30 July 2017

Key Information

Capital

Addis Ababa

Population

99.4 million

Area

1,221,900 sq km

Currency

Ethiopian Birr (1 ETB = 0.0429 USD as of 28 July 2017)

Official language

Amharic

Form of government

Parliamentary republic

Ease of doing business by World Bank

# 159 out of 190 in 2017 (No change)

The Global Competitiveness Index by the World Economic Forum

# 109 out of 138 in 2016/17 (No change)

Logistics Performance Index by World Bank

# 126 out of 160 in 2016

Major merchandise exports (% of total, 2015)

Major merchandise imports (% of total, 2015)

Agricultural products (83.1%)

Manufactured goods (69.6%)

Manufactured goods (11.4%)

Agricultural products (15.7%)

Fuels and mining products (5.3%)

Fuels and mining products (14.6%)

Top three export markets (% of total, 2016)

Top three import markets (% of total, 2016)

European Union (23.1%)

China (31.9%)

USA (9.8%)

European Union (17.1%)

Saudi Arabia (9.7%)

USA (8.8%)

Sources: Economist Intelligence Unit, the World Trade Organization

Political Highlights

Ethiopia is the second most populous country in Africa. Hailemariam Desalegn was sworn in as prime minister of Ethiopia in September 2012, following the death of long-term leader Meles Zenawi who ruled Ethiopia for more than 20 years. Ethiopia's government keeps a tight grip on the country, and Desalegn’s political coalition gained all 547 seats in the 2015 parliamentary election.

While Ethiopia stands out among neighbors for its political and economic stability, ethnic tension has posed a threat to the government’s ability to maintain its strong hold. Currently, the government is dominated by the Tigray minority group, which represents only 6% of the country’s population. The Oromo, Ethiopia’s largest ethnic group constituting over 30% of the population, and other ethnic groups say they have been marginalized by the government. Mass protests and violence prompted the introduction of a state of emergency in October 2016.

On a diplomatic front, Ethiopia has had a long-running border dispute with Eritrea, which resulted in military clashes between the two countries in 2016. Relations with Western allies and donors will remain subject to strains arising from the imposition of the state of emergency. However, these allies will continue to balance concerns about the country’s human rights record with the wish to fight terrorism and maintain ties with Ethiopia. Meanwhile, Ethiopia and China have established diplomatic ties since 1970. In June 2017, they signed agreements to strengthen cooperation areas such as peace and security, human resources, and coordination on global and regional issues.

Economic Trend

* Estimates

Source: The International Monetary Fund (IMF)

Ethiopia has a state-controlled economy. Key sectors, such as telecommunications, banking and insurance, and power distribution, are state-owned. More than 70% of Ethiopia’s population is still employed in the agricultural sector, but services (47% of GDP) have surpassed agriculture (36% of GDP) as the principal economic sector. Ethiopia’s economy has recorded strong economic growth over the past decade, driven by government investment in infrastructure, as well as by sustained progress in the agricultural and service sectors.

Rapid economic growth has reduced poverty in both urban and rural areas. While 55.3% of Ethiopians lived in extreme poverty in 2000, by 2011, this figure had dropped to 33.5% according to the World Bank. Nevertheless, the country’s per capita income of around US$800 remains low, due to both rapid population growth (2015:2.5%) and a low starting base.

The current 2016-20 five-year plan, known as the Growth and Transformation Plan II, is underpinned by an effort to transform the country into an export-oriented manufacturing hub. It emphasizes the development of manufacturing in sectors in which Ethiopia has a comparative advantage, such as textiles and garments, leather goods, and processed agricultural products. The plan targets an annual average GDP growth of 11%, with the eventual aim of the country reaching middle-income status by 2025. However, the country’s relatively weak private investment and business climate would place constraint on growth.

Hong Kong – Ethiopia Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Ethiopia decreased by 29.2% from HK$1,550 million in 2015 to HK$1,098 million in 2016. The top three export categories to Ethiopia were: (1) telecommunications, audio & video equipment (-22.6%), (2) electrical machinery, apparatus & appliances, & parts (+92.0%), and (3) office machines & computers (+249.3%), which represented 85.5% of total exports to Ethiopia.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering Ethiopian buyers except for extending the waiting period for transfer delay claims from 4 months to 9 months. The Corporation’s underwriting experience on Ethiopia has been satisfactory, with no claim payment or payment difficulty case reported in the past 12 months (from July 2016 to June 2017).

Please click here to download the charts (PDF format).

Last update: 30 July 2017

Key Information

Capital

Dili

Population

1.2 million

Area

14,609 sq km

Currency

US dollar

Official language

Portuguese and Tetum

Form of government

Semi-presidential republic

Ease of doing business by World Bank

# 175 out of 190 in 2017 (↓2)

Sources: Economist Intelligence Unit

Political Highlights

Timor-Leste achieved independence in 2002 and is currently experiencing relative political stability. In the parliamentary elections held in July, the incumbent governing coalition, formed by the Revolutionary Front for an Independent Timor-Leste (Fretilin) and the National Congress for Timorese Reconstruction (CNRT), won about 60% of the vote.

The government will focus on the progress of Timor-Leste's Strategic Development Plan (covering 2011-2030), which is a socio-economic development plan that sets the target of achieving high-middle-income status for the country by the end of the programme. The plan also includes large-scale infrastructure development and investments in health and education.

Timor-Leste generally enjoys good relations with countries in Asia and Australasia, but a dispute with Australia over its maritime border threatens to sour relations between the two countries. On the other hand, ties with China have been strengthened. Chinese technicians have tutored their counterparts on the latest agricultural methods, urban planning, tourism, among other things.

Economic Trend

* Estimates
Source: The International Monetary Fund (IMF)

Over the past decade, economic development in Timor-Leste has been driven largely by the oil and gas sector, which accounts for over 90% of government revenues. But faced with a protracted period of low global oil prices, Timor-Leste is now adjusting to become less dependent on oil, by promoting the development of agriculture, mining, tourism and manufacturing sector. The near-term economic outlook is generally favorable with a continuing non-oil growth recovery, supported by increasing public spending and foreign direct investment.

While prudent saving of its oil wealth in the Petroleum Fund (PF) has provided Timor-Leste with a financial cushion to help offset revenue losses related to the fall in oil prices, the country’s narrow economic base has led to concerns about the long-term fiscal sustainability as oil fields in operation are expected by the International Monetary Fund (IMF) to be depleted by around 2020.

With a per capita GDP of around US$ 2,100 in 2016, Timor-Leste is classified as one of the Least Developed Countries by the United Nations. Economic diversification, and how best to use accumulated oil-and-gas wealth to lift the non-oil economy and reduce poverty, remain the country’s underlying economic policy challenges.

Hong Kong – Timor-Leste Trade

Data is not available from the Census and Statistics Department of Hong Kong.

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) offers coverage on buyers in Timor-Leste with payment terms in Irrevocable Letter of Credit (ILC). In the past 12 months (from July 2016 to June 2017), there was no insured business on Timor-Leste.

Please click here to download the charts (PDF format).

Last update: 30 July 2017

Key Information

Capital

Amman

Population

9.8 million

Area

89,342 sq km

Currency

Jordanian dinar (pegged to the US dollar at 1 USD = 0.709 JOD)

Official language(s)

Arabic

Form of government

Constitutional monarchy

Ease of doing business by World Bank

# 118 out of 190 in 2017 (↑1)

The Global Competitiveness Index by the World Economic Forum

# 63 out of 138 in 2016/17 (↑1)

Logistics Performance Index by World Bank

# 67 out of 160 in 2016

Major merchandise exports (% of total, 2015)

Major merchandise imports (% of total, 2015)

Manufactured goods (70.8%)

Manufactured goods (55.1%)

Agricultural products (20.0%)

Agricultural products (20.3%)

Fuels and mining products (8.5%)

Fuels and mining products (19.2%)

Top three export markets (% of total, 2015)

Top three import markets (% of total, 2015)

USA (18.5%)

European Union (21.6%)

Saudi Arabia (14.8%)

Saudi Arabia (15.0%)

Iraq (9.6%)

China (12.9%)

Source: Economist Intelligence Unit (http://www.eiu.com), World Trade Organization

Political Highlights

The Hashemite Kingdom of Jordan (“Jordan”) is a constitutional monarchy. King Abdullah II is the ultimate decision-making authority who has the power to dissolve parliament and appoint the Prime Minister. Jordan has so far weathered the political storm that has engulfed much of the Middle East since late 2010. However, several emerging challenges and the public’s greater demands for political reforms could pose threats to the stability of the kingdom.

Adverse regional developments, in particular the Syria and Iraq crises, remain the largest recent shock affecting Jordan, as reflected in the large refugee influx, disrupted trade routes and lower investments and tourism inflows. As of March 2017, Jordan has already accommodated over 650,000 registered Syrians refugees. The large influx of Syrian refugees has placed a huge strain on Jordan’s security and its government finances. Meanwhile, the high unemployment rate, which rose to 18.2% in the first quarter of 2017, continues to present challenges.

Although Jordan is a small country, it plays a pivotal role in the struggle for power in the Middle East due to its strategic location at the meeting point of Asia, Europe and Africa. Jordan adopts a pro-Western foreign policy and maintains strong ties with the US and the European Union (EU).

Economic Trend

* Estimates ^Forecasts

Source: Economist Intelligence Unit (http://www.eiu.com)

With few natural resources and a small industrial base, Jordan has an economy which is heavily dependent on external aid as well as remittances from expatriate workers. The prolonged regional instability and the refugee crisis have continued to take a toll on Jordan’s economy. After two straight years of economic slowdown, growth is expected to only marginally improve in 2017.

Macroeconomic conditions remain challenging with large budget and current account deficits, as well as rising government debt. In August 2016, Jordan and the International Monetary Fund agreed to a US$723 million Extended Fund Facility in a three-year program to support economic and financial reforms aimed at lowering public debt and boosting growth. The first review of the program was completed in June 2017, unlocking US$ 71 million.

Jordan has pegged its currency to the US dollar since 1995, and this has helped achieve monetary stability and maintain investor confidence. International reserves are at a comfortable level, which should help support the peg. As of February 2016, reserves stood at US$ 16.4 billion, equivalent to around 8 months of imports.

Hong Kong – Jordan Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Jordan increased by 4.8% from HK$1,382 million in 2015 to HK$1,448 million in 2016. The top three export categories to Jordan were: (1) telecommunications, audio & video equipment (+28.6%), (2) textiles (-12.9%), and (3) photographic apparatus, equipment and supplies and optical goods, nes; watches and clocks (+21.2%), which represented 73.6% of total exports to Jordan.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering Jordanian buyers. Currently, the insured buyers in Jordan are mainly small and medium sized companies. For 2016, the number and the amount of credit limit applications decreased by 50.0% and 38.3% respectively, while insured business decreased by 21.0%. Major insured products were electronics, textiles and electrical appliances, which represented 93.0% of ECIC’s insured business on Jordan. The Corporation’s underwriting experience on Jordan has been satisfactory, with no claim payment or payment difficulty case reported during the past 12 months (from July 2016 to June 2017).

Please click here to download the charts (PDF format).

Last update: 14 July 2017

Key Information

Capital

Manama

Population

1.4 million

Area

760 sq km

Currency

Bahraini Dinar (pegged to the US dollar at a rate of BD0.376:US$1)

Official language

Arabic

Form of government

Constitutional monarchy

Ease of doing business by World Bank

# 63 out of 190 in 2017 (↑3)

The Global Competitiveness Index by the World Economic Forum

# 48 out of 138 in 2016/17 (↓9)

Logistics Performance Index by World Bank

# 44 out of 160 in 2016

Major merchandise exports (% of total, 2015)

Major merchandise imports (% of total, 2015)

Manufactured goods (51.7%)

Manufactured goods (52.0%)

Fuels and mining products (44.2%)

Fuels and mining products (33.7%)

Agricultural products (4.1%)

Agricultural products (12.4%)

Top three export markets (% of total, 2015)

Top three import markets (% of total, 2015)

Saudi Arabia (30.3%)

European Union (13.5%)

United Arab Emirates (6.9%)

China (9.6%)

USA (5.1%)

United Arab Emirates (7.1%)

Sources: Economist Intelligence Unit, the World Trade Organization

Political Highlights

Bahrain is a constitutional monarchy with an elected legislative assembly. The Sunni Al-Khalifa royal family holds the main political and military posts and the Shia majority claims that it is economically and politically marginalized. Members of the Shia and the Sunni share many fundamental beliefs and practices, but they differ in doctrine, ritual, law, among other things. The divide between the two sects has led to long-running tension in the kingdom and sporadic violence.

Bahrain relies on oil for over 80% of its government revenue. Amid a protracted period of low oil prices, Bahrain has cut government spending to narrow budget deficit. It reduced government subsidies on gasoline and ended subsidies on meat and poultry. Spending cuts are likely to remain focused on lowering the subsidy bill, along with some reductions in capital spending. However, the unpopular move and the subsequent higher living costs could increase the risk of civil unrest.

Faced with ongoing unrest in the country and growing regional security threats, Bahrain’s foreign policy focuses on strengthening ties with its key ally, Saudi Arabia, which is also ruled by a Sunni monarchy. In June, Bahrain, joining Saudi Arabia, Egypt and the United Arab Emirates, cut diplomatic ties with Qatar, accusing it of supporting terrorism. Meanwhile, Bahrain will maintain close ties with the United States, an important international ally, which has based the Navy's Fifth Fleet in Bahrain.

Economic Trend

^#Actual * Estimates ^Forecasts

Source: Economist Intelligence Unit

While government revenues heavily depend on the hydrocarbons sector, Bahrain’s economy is fairly diversified in terms of GDP contribution. Hydrocarbons sector accounts for roughly 20% of GDP, and non-oil activities, including aluminum smelting, iron pelletization, fertilizers production, Islamic and offshore banking, insurance, ship repairing, and tourism, take up the rest of the GDP.

Last year, real GDP grew by 3%, with strong non-oil growth of 3.7% aided by the implementation of the Gulf Cooperation Council (GCC)-funded projects. The Council is a political and economic alliance made up of six Gulf states, including Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Qatar and Bahrain. It pledged grants worth a total of US$10 billion to Bahrain in 2011, in the wake of the Arab Spring, to be disbursed by end-2021. By the end of 2016, work had begun on US$3 billion worth of projects. For 2017, growth is projected at 2.0%, and continues to be driven by strong infrastructure spending from GCC funds. However, a range of austerity measures, such as the cuts in subsidies, will continue to have knock-on effects on private consumption.

Despite the implementation of fiscal consolidation measures, the extended period of low oil prices has adversely affected Bahrain’s fiscal health. Bahrain has an extremely low-tax environment with no corporate tax on income, sales, or capital gains, with the exception of companies that operate in the oil and gas sector. Meanwhile, its borrowing ability in the international credit market is constrained by its junk credit ratings. Therefore, it has few options to cover budget deficit, and a sizable fiscal adjustment is urgently needed to restore fiscal sustainability.

Due to the low oil prices and the country’s thin reserve cushion, the dinar's peg to the US dollar, set at BD0.376:US$1, is under pressure. As the central bank propped up the dinar by selling dollars in the currency market, the kingdom's foreign-exchange reserves fell from around US$6 billion at end-2014 to US$1.7 billion in February 2017, the equivalent of a little more than one month’s imports cover. With the central bank intent on supporting the peg, it is likely that financial support will be needed from Bahrain's GCC allies in order to prevent the depletion of the country's foreign-exchange reserves.

Hong Kong – Bahrain Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Bahrain increased by 12.3% from HK$759 million in 2015 to HK$852 million in 2016. The top three export categories to Bahrain were: (1) telecommunications, audio & video equipment (+7.6%), (2) power generating machinery and equipment (+238.0%), and (3) office machines & computers (+13.5%), which represented 73.5% of total exports to Bahrain.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering Bahraini buyers. Currently, the insured buyers in Bahrain are mainly small and medium sized companies. For 2016, the number and the amount of credit limit applications on Bahrain increased by 12.5% and 514.2% respectively compared with 2015. Insured business increased by 99.7%. The Corporation’s underwriting experience on Bahrain has been satisfactory, with no claim payment or payment difficulty case reported in the past 12 months (from July 2016 to June 2017).

Please click here to download the charts (PDF format).

Last update: 10 July 2017

Strengths

Ÿ   Favorable geographic location near Germany

Ÿ   Good infrastructure

Ÿ   Relatively low labor cost

Challenges

Ÿ   Dependence on exports

Ÿ   High external and public debt levels

Ÿ   Shortage of skilled labor

Key Information

Capital

Budapest

Population

9.8 million

Area

93,028 sq km

Currency

Hungarian Forint (1 HUF = 0.0037 USD or 0.0032 EUR as of 4 July 2017)

Official language

Hungarian

Form of government

Republic

Ease of doing business by World Bank

# 41 out of 190 in 2017 (↓1)

The Global Competitiveness Index by the World Economic Forum

# 69 out of 138 in 2016/17 (↓6)

Logistics Performance Index by World Bank

# 31 out of 160 in 2016

Major merchandise exports (% of total, 2016)

Major merchandise imports (% of total, 2016)

Machinery & equipment (57.9%)

Machinery & equipment (49.8%)

Manufactured goods (31.3%)

Manufactured goods (36.6%)

Food, beverages & tobacco (7.1%)

Fuels & energy (6.4%)

Top three export markets (% of total, 2016)

Top three import markets (% of total, 2016)

Germany (26.2%)

Germany (24.9%)

Romania (4.7%)

China (6.5%)

Slovakia (4.6%)

Austria (6.0%)

Source: Economist Intelligence Unit

Political Highlights

Fidesz dominates political scene

Hungary is a parliamentary republic. It has a single-chamber parliament whose 199 members are elected by voters every four years. The Prime Minister is the head of government while the President, who has little real power, is the head of state. The Fidesz – Hungarian Civic Union (Fidesz) government led by Prime Minister Viktor Orbán, now in its second term, continues to dominate the political scene with a tough nationalist stance. The next parliamentary election is scheduled for 2018 and Fidesz appears to be in a strong position to retain office. Its overall aim is to maintain its electoral base and prevent further expansion of support for the far-right Jobbik party.

EU-Hungary divisions

Hungary joined the European Union (EU) in 2004. Over the past few years, Budapest has clashed with Brussels on a range of issues from the economy to immigration. The EU objects to Hungary's tight controls on asylum seekers and non-governmental organisations (NGOs), as well as to a higher education law. The government’s pro-Russian tilt has also raised concerns from the EU. Russia supplies over 70% of Hungary’s natural gas and has given Hungary a EUR10 billion loan to expand a nuclear power plant. And within the EU, Hungary has been one of the least supportive of the economic sanctions imposed over Russia’s actions in Ukraine.

Economic Trend

* Estimates  ^ Forecasts

Source: Economist Intelligence Unit

Growth set to strengthen in 2017

Hungary has a per capita income nearly 60% of the EU average. Proximity to Germany, Europe’s largest economy, and relatively low labor cost have made Hungary an important part of the German-Central European supply chain. Exports account for over 90% of GDP with the EU being the largest market. Over the past few years, Hungary has succeeded in achieving continuous growth and debt reduction. Growth was supported by utilization of EU funds, favorable external environment (low interest rates and commodity prices, and strong export growth), as well as accommodative monetary and fiscal policies. After a weaker growth in 2016 due to decline in investment related to a slowdown in the disbursement of EU funds in the beginning of a new program period, economic growth is forecast to pick up in 2017, driven by robust private consumption and rebounding investment.

Challenges ahead

Hungary’s external and public debt levels are still high despite steady decline, representing sources of vulnerability. The International Monetary Fund forecast that financing needs to be around 20% of GDP. At the same time, perceptions of Hungary’s business environment have worsened due to unpredictability of policymaking. In recent years, the government has taken a more nationalist and populist approach towards economic management and has implemented unorthodox economic policies. For instance, it increased taxes on foreign-dominated sectors, such as banking, retail, telecoms and energy, and nationalized private pension funds. Parliamentary elections scheduled for Spring 2018 could increase pressure for more interventions in the economy. Also, as Hungarians increasingly seek work abroad, shortages of highly educated and skilled labor have become one of the key binding constraints on growth.  

No timetable on joining euro

Hungary has yet to become a member of the euro area and the forint is not yet within the Exchange Rate Mechanism, one of the convergence criteria for entry to the euro area. A country must participate in the mechanism without severe tensions for at least two years before it can qualify to adopt the euro, during which, the exchange rate of a non-euro area member state is fixed against the euro and is only allowed to fluctuate within set limits. For now, Hungary does not have a target date to adopt the euro.

Hong Kong – Hungary Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Hungary increased by 9.0% from HK$12,255 million in 2015 to HK$13,355 million in 2016. The top three export categories to Hungary were: (1) telecommunications, audio & video equipment (+6.4%), (2) electrical machinery, apparatus & appliances, & parts (+2.5%), and (3) office machines & computers (+48.1%), which represented 92.7% of total exports to Hungary.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering Hungarian buyers. Currently, the insured buyers in Hungary range from small and medium sized companies to large-scale manufacturing arms of foreign companies. For 2016, the number and the amount of credit limit applications on Hungary decreased by 7.3% and 43.5% respectively, while insured business increased by 7.6%. Major insured products were electronics, electrical appliances and watches & clocks, which represented 71.3% of ECIC’s insured business on Hungary. The Corporation’s underwriting experience on Hungary has been satisfactory, with no claim payment or payment difficulty case reported during the past 12 months (July 2016 to June 2017).

Please click here to download the charts (PDF format)

Last update: 5 July 2017

Strengths

Ÿ  Sound economic fundamentals and financial system

Ÿ  Good basic infrastructure

Ÿ  Well-developed manufacturing sector

Challenges

Ÿ  Reliance on oil and gas sector

Ÿ  Ethnic discord

Ÿ  Competition from other low-cost ASEAN countries

Key Information

Capital

Kuala Lumpur

Population

30.9 million

Area

329,847 sq km

Currency

Malaysian Ringgit (1 MYR = 0.2331 USD as of 27 June 2017)

Official language

Bahasa Malaysia

Form of government

Constitutional Monarchy

Ease of doing business by World Bank

# 23 out of 190 in 2017 (↓1)

The Global Competitiveness Index by the World Economic Forum

# 25 out of 138 in 2016/17 (↓7)

Logistics Performance Index by World Bank

# 32 out of 160 in 2016

Major Merchandise Exports (% of total, 2016)

Major Merchandise Imports (% of total, 2016)

Machinery & transport equipment (43.1%)

Machinery & transport equipment (45.3%)

Mineral fuels (14.0%)

Manufactured goods (12.6%)

Manufactured goods (8.9%)

Chemicals (10.5%)

Top three export countries (% of total, 2016)

Top three import countries (% of total, 2016)

Singapore (14.2%)

China (20.6%)

China (11.6%)

Singapore (10.1%)

US (10.6%)

US (8.5%)

Source: Economist Intelligence Unit

Political Highlights

Next general election due in 2018

The Constitution of Malaysia requires that a general election must be held at least once every five years. The ruling Barisan Nasional (BN), which is a multi-ethnic coalition of parties headed by the United Malays National Organization (UMNO), has been in power since the country’s independence in 1957. In the general election held in 2013, the BN retained power but failed for the first time to win more than 50% of the popular vote. The next general election is due in 2018. Speculation is building that parliament might be dissolved later this year, paving the way for an early poll. Given the fragmented opposition, made up of three separate groups, the ruling coalition appears well placed to win the next election.

High-income country by 2020

The government’s policy agenda will centre on the Government Transformation Programme started in 2010, which outlines seven initiatives, including moves to improve education, upgrade rural infrastructure and tackle corruption, aiming at transforming Malaysia from a upper middle-income into a high-income country by 2020. The 11th Malaysia Plan (11MP), a public-spending agenda for 2016-20, will support the implementation of these initiatives. The latest strategy focuses on poverty alleviation, income inequality, green growth and infrastructure development. To realize the goal of becoming a high-income country, Malaysia targeted annual economic growth of 5-6% during the covered period, a goal that is not easy to achieve given the government's reliance on oil-related revenue and the relatively low global oil prices since the plan was drafted.

National unity remains elusive

Malaysia is a multi-ethnic and multi-religious country. Malays form about half of the population, followed by Chinese (23%), indigenous people (12%) and Indian (7%). The majority Muslim ethnic Malay is dominant politically and pro-Malay policies have been in place since 1970s. Facing with the prolonged tensions over ethnic and religious rivalries, Najib introduced the ‘1Malaysia’ concept aiming at uniting the people to work as one nation, emphasizing ethnic harmony and national unity. However, to safeguard support among the ethnic Malay, the UMNO may burnish their Islamic credentials in the run-up to the next general election, which could worsen race relations and deter foreign investment at a time economic growth is moderating. In the meantime, security problems on the eastern coast of Sabah could also hurt the country’s tourism sector.

Economic Trend

* Estimates ^ Forecast

Source: Economist Intelligence Unit

Momentum builds up for higher growth

Malaysia’s economy is highly open to international trade, with exports accounting for roughly 70% of GDP. Major exports include electrical appliances, electronic parts and components, oil and gas, palm oil and rubber. After a tumultuous 2016 in which real GDP grew at its slowest rate since 2009, prospects for growth look broadly favourable for 2017. An anticipated pick-up in world trade growth should inject life into the export-oriented sector, while the likely commencement of large infrastructure projects should increase activity in the construction sector and help to underpin overall investment spending. Such conditions would point to accelerating GDP growth. Household consumption growth, however, will be tempered this year compared with 2016 by an anticipated pick-up in consumer price inflation.

Steps to secure fiscal sustainability

Recently, the government has taken steps to shield the fiscal position from the effects of lower oil-related revenues, which account for over 20% of the total government revenue. Measures included the removal of fuel subsidies and the introduction of Good and Services Tax (GST), which have helped the country diversify its revenue base away from reliance on oil and gas sector. In the face of a rising household debt, which rose from 60% of GDP in 2008 to 89% in 2015, some macro-prudential policies have also been introduced to slow credit growth and curb household borrowing. As a result, the household debt to GDP ratio contracted to 88.4% at the end of 2016, as households cut loan exposure for purchases of non-residential properties, cars and securities.

To stay competitive, Moving up the value chain

As a leading force in regional integration and the promotion of the ASEAN trading block, Malaysia has managed to consolidate its position as the principle gateway to South-east Asia. While it benefits from regional integration, it is also squeezed by the fierce competition from both low-wage economies and more innovative advanced economies in the region. To avoid falling into the so-called “middle-income trap” and achieve the high-income status, Malaysia’s economy will have to move away from traditional sectors like manufacturing and focus more on higher value-added activities in both industry and services, such as pharmaceutical industry, biotechnology and Islamic finance. Accelerated implementation of productivity-enhancing reforms to increase the quality of human capital will be important to Malaysia’s long-term success.

Hong Kong – Malaysia Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to Malaysia decreased by 6.6% from HK$29,199 million in 2015 to HK$27,273 million in 2016. The top three export categories to Malaysia were: (1) electrical machinery, apparatus & appliances, & parts (-4.4%), (2) telecommunications, audio & video equipment (-2.6%), and (3) office machines & computers (-32.2%), which represented 70.1% of total exports to Malaysia.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (HKECIC) imposes no restrictions on covering Malaysian buyers. Currently, the insured buyers in Malaysia range from small and medium sized companies to subsidiaries of foreign listed companies. For 2016, the number of credit limit applications on Malaysia increased by 17.6%, while the amount of credit limit applications decreased by 19.7%. Insured business decreased by 2.7%. Major insured products were papers (+8,166.1%), electronics (-18.0%) and chemical products (+38.9%), which represented 65.7% of ECIC’s insured business on Malaysia. The Corporation’s underwriting experience on Malaysia has been acceptable, with two claim cases reported in the past 12 months (from June 2016 to May 2017), involving cameras & optical goods, and furniture.

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Last update: 30 June 2017

Strengths

Ÿ  Strong growth potential

Ÿ  Broadly stable politics

Challenges

Ÿ  High ratio of non-performing loans

Ÿ  Twin deficit accounts

Key Information

Capital

New Delhi

Population

1.27 billion

Area

3,287,263 sq km

Currency

Indian rupee (1 INR = 0.0155 USD as of 27 June 2017)

Official language

Hindi, English

Form of government

Federal republic

Ease of doing business by World Bank

# 130 out of 190 in 2017 (↑1)

The Global Competitiveness Index by the World Economic Forum

# 39 out of 138 in 2016/17 (↑16)

Logistics Performance Index by World Bank

# 35 out of 160 in 2016

Major Merchandise Exports

(% of total, 2015/2016)^*

Major Merchandise Imports

(% of total, 2015/2016)^*

Engineering goods (23.1%)

Petroleum products (21.8%)

Gems & jewellery (15.1%)

Electronic goods (10.5%)

Petroleum products (11.6%)

Gold & silver (9.3%)

Top three export countries (% of total, 2016)

Top three import countries (% of total, 2016)

USA (16.2%)

China (17.3%)

United Arab Emirates (11.8%)

USA (5.9%)

Hong Kong (5.1%)

United Arab Emirates (5.5%)

^* Fiscal year (April-March)

Source: Economist Intelligence Unit (http://www.eiu.com)

Political Highlights

Modi tightens trip on power

India is a federal republic governed under a parliamentary system. The ruling National Democratic Alliance (NDA) coalition has been in office since 2014 and is led by the centre-right Bharatiya Janata Party (BJP), which also governs many large and important states in central and western India. The prime minister, Narendra Modi, is proving to be the country's most dominant political leader in decades and is well placed to win a second five-year term at the parliamentary election in 2019. The high popularity of Modi and the BJP helped bringing political stability to the country.

More prominent role on the world stage

Externally, India’s relationship with Pakistan over disputed Kashmir area appeared to have worsened in recent years, with occasional cross border exchanges of fire between Indian and Pakistani forces. The bilateral ties are expected to remain prone to similar spats as long as the dispute over Kashmir remains unresolved. Meanwhile, India is seeking to take an increasingly prominent role on the world stage over the coming years. It focuses on developing relations with countries in Southeast Asia (except with Pakistan) and is pushing for greater integration. Modi also paid a visit to Europe in May this year, hoping to reinforce trade ties with Germany, France, Spain and Russia.

Economic Trend

^* Estimates    ^{^} Forecasts

Source: Economist Intelligence Unit (http://www.eiu.com)

Fastest growing major market

India’s real GDP grew by 7.1% in fiscal year 2016-17 (April – March), according to official data, confirming its status as the world’s fastest growing major economy. Economic expansion was driven predominately by private consumption and government expenditure. By contrast, gross-fixed investment in 2016-17 remained bogged down by stress on banks' and corporate balance sheets. Notably, the economy only expanded 6.1% yr/yr in the last quarter of FY 2016-17, compared to 7% growth in Q3, partly reflecting Modi’s decision in last November to ban all 500 and 1,000 rupee notes from circulation in an attempt to strike against corruption. Demonetization caused an immediate cash crunch, and activity in cash-reliant sectors was affected.

Landmark reforms in progress

Outlook remains bright in India for fiscal year 2017-18, as economic fundamentals are strong, and reform momentum continues. The goods and services tax (GST) is on track for implementation in the second quarter of the fiscal year, and is expected to yield substantial growth dividends from higher efficiencies, and raise more revenues in the long term. The World Bank commented that the roll-out of the GST in India could reduce the cost of doing business for firms, and reduce logistics costs of moving goods across states. Meanwhile, a new bankruptcy law came into force at the end of last year introduced a new insolvency and resolution regime for India, speeding up and simplifying the process of corporate liquidations and debt recovery. These reforms will likely increase the formalization of the Indian economy and attract more foreign investments.

Downside risks still exist

While the balance of risks has improved, economic risks remain tilted to the downside. On the external side, despite the reduction in imbalances and strengthening of buffers, the impact from intensified global financial market volatility could be disruptive. Rising crude oil prices will push up India’s trade deficit. The normalization of monetary policy in the US may also induce capital outflows from India’s debt market, putting downward pressure on the rupee. Domestic risks include continued weaknesses in corporate financial positions and public bank asset quality. Gross non-performing assets (NPAs) of state owned banks surged 56.4% to INR 61.49 trillion during the 12-month period ended December 2016, despite a series of measures to deal with bad loans by the government. As a result of the sharp rise in non-performing assets and write-offs, banks are not able to pass on the benefit of policy rate cuts to borrowers, especially those in the retail sector and SMEs.

Hong Kong – India Trade

Source: Census and Statistics Department of Hong Kong

Total exports from Hong Kong to India increased by 14.6% from HK$101,831 million in 2015 to HK$116,702 million in 2016. The top three export categories to India were: (1) non-metallic mineral manufactures, nes (+27.8%), (2) telecommunications, audio & video equipment (+6.4%), and (3) electrical machinery, apparatus & appliances, & parts (+36.2%), which represented 83.5% of total exports to India.

Source: Census and Statistics Department of Hong Kong

ECIC Underwriting Experience

The Hong Kong Export Credit Insurance Corporation (ECIC) imposes no restrictions on covering Indian buyers. Currently, the insured buyers in India are mainly small and medium-sized companies to listed companies. For 2016, the number of credit limit applications on India decreased by 1.7% compared with 2015, while the amount of credit limit applications increased by 95.5%.  Insured business during the year also increased by 177.84%.  Major insured products were electrical appliances (+6,283%), clothing (+28.81%) and electronics (-65.22%), which represented 89.0% of ECIC’s insured business on India.  The Corporation’s underwriting experience on India has been acceptable, two claim cases were reported in the past 12 months (from June 2016 to May 2017), involving electrical appliances.

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Last update: 27 June 2017